onomi   e orms      6.11
     (iii) External Sector Reforms                              from the governments. The major components of
                                                                the reform are as given below:
     They consisted of policies like, abolishing
     quantitative restrictions on import, switching to          (i) Factor Market Reforms
     the floating exchange rate, full current account
                                                                Considered as the ‘backbone’ for the success of the
     convertibility, reforms in the capital account,
                                                                reform process in India, it consists of dismantling
     permission to foreign investment (direct as well
                                                                of the Administered Price Mechanism (APM).
     as indirect), promulgation of a liberal Foreign
                                                                There were many products in the economy whose
     Exchange Management Act (the FEMA replacing
                                                                prices were fixed/regulated by the government,
     the FERA), etc.                                            viz., petroleum, sugar, fertilizers, drugs, etc.
     (iv) Financial Sector Reforms                              Though a major section of the products under
                                                                the APM were produced by the private sector,
     Several reform initiatives were taken up in areas          they were not sold on market principles which
     such as banking, capital market, insurance, mutual         hindered the profitability of the manufacturers
     funds, etc.                                                as well as the sellers and ultimately the expansion
                                                                of the concerned industries leading to a demand-
     (v) Tax Reforms                                            supply gap. Under market reforms these products
     This consisted of all the policy initiatives directed      were to be brought into the market fold.
     towards simplifying, broadbasing, modernising,                  In the petroleum segment now only kerosene
     checking evasion, etc.                                     oil and LPG remained under the APM, while
          A major re-direction was ensued by this               petrol, diesel (by March 2014), lubricants have
     generation of reforms in the economy—the                   been phased out. Similarly, the income tax paying
     ‘command’ type of the economy moved strongly               families don’t get sugar from the TPS on subsidies;
     towards a market-driven economy, private sector            only urea, among the fertilizers, remain under
     (domestic as well as foreign) to have greater              APM, while many drugs have also been phased out
                                                                of the mechanism. Opening the petroleum sector
     participation in the future.
                                                                for private investment, cutting down the burden
     seconD generAtion reforms (2000–01 onWArDs)33              of levy on sugar (levy obligation was abolished
                                                                by mid-2013), etc., are now giving dividends to
     The government launched the second generation              the economy. But we cannot say that the Factor
     of reforms in 2000-01. Basically, the reforms India        Market Reforms (FMRs) are complete in India.
     launched in the early 1990s were not taking place          It is still going on. Cutting down subsidies on
     as desired and a need for another set of reforms was       essential goods is a socio-political question in
     felt by the government, which were initiated with          India. Till market-based purchasing power is not
     the title of the Second Generation of economic             delivered to all the consumers, it would not be
     reforms. These reforms were not only deeper and            possible to complete the FMRs.
     delicate, but required a higher political will power
                                                                (ii) Public Sector Reforms
       33.  Based on the Ministry of Finance, Economic Survey
            2000–01 (New Delhi: Government of India, 2001);     The second generation of reforms in the public
            and Union Budget, 2001–02 especially besides other  sector especially emphasises on areas like greater
            official announcements y the o in the coming years. functional autonomy, freer leverage to the capital